And the winner is……. HMRC!
From April 2020, HMRC will become a secondary preferential creditor in any insolvency process. In justifying this decision, the Government say that it is an attempt to put more taxes into public funded services.
This new status will only apply to certain taxes, i.e. those which are held in trust by a company, including VAT, PAYE, employee NI and CIS deductions, whilst other taxes, including Corporation Tax and employer NI, will still rank as unsecured claims.
In an insolvency procedure, the preferential creditors rank ahead of the secured creditors (relying on their floating charge) and the unsecured creditors. Many funders will be nervous about the proposed changes and may look to reduce their lending to your clients or ask for more security.
The Government has said the unsecured creditor position will not be made worse as they very rarely receive a payment. At Redman Nichols Butler we take a different view as we pay dividends to unsecured creditors whenever possible.
Changes to IR35 = MVL
From April 2020, the government will change the rules for off-payroll working in the private sector for any medium or large business.
The employer will become responsible for paying the workers’ PAYE and NIC.
This means that some of your clients may look to become employees rather than trading through their personal service companies. One method of extracting the company’s reserves in a tax efficient manner is through a members’ voluntary liquidation (“MVL”).
At Redman Nichols Butler, our MVLs start from a very competitive £750 plus disbursements plus VAT